EarthLink Holdings Corp.

Some of us spend way too much time online, and EarthLink is OK with that. The company provides Internet connections to more than 1 million consumers and about 150,000 businesses in the US. About two-thirds of those are broadband users. It also offers such services as VoIP computer telephony and Web hosting. EarthLink provides broadband access over cable lines through agreements with network operators including Time Warner Cable, Bright House, and Comcast, while DSL and dial-up connections are made possible over phone lines owned by AT&T and Verizon, among others. The company enterprise segment implements and manages private data networks in addition to providing Internet access and Web hosting for businesses.

Operations

The company operates in two segments – business services and consumer services. Its business customers account for three-quarters of sales. Residential customers make up the other 25%. While it serves fewer business customers (150,000 vs. 1 million residential customers), EarthLink offers more robust services to business customers and is able to charge more.

Geographic Reach

EarthLink serves residential and business customers nationwide.

Sales and Marketing

The company scouts for new business customers through direct, inside, and independent sales channels, such as resellers and IT consulting firms. It doesn’t use a dedicated sales force for residential customers; they’re targeted through call centers, online ads, and resellers such as Time Warner Cable and Dish Network.

EarthLink is reducing its direct sales presence in smaller markets to focus on larger geographic areas in order to accelerate its transition into an IT services company.

Financial Performance

EarthLink became a billion-dollar company again in 2011 after making several acquisitions. Overall sales increased a scant 3% in 2012 to $1.3 billion. While its business services segment grew 10% for the year, residential service revenues fell 15% as the number of subscribers fell from 1.5 million in 2011 to 1.2 million in 2012. The company expects its residential service business to continue to decline from competition from other providers that offer bundled services (such as cable TV and phone). Profits fell 78% in 2012 to $7.5 million due to increased operating costs.

Mergers and Acquisitions

In mid-2013 EarthLink bought CenterBeam for $22 million and added CenterBeam's remote managed IT services and help desk capabilities to its EarthLink Business division.

2011 was an active year for acquisitions, as EarthLink bought five companies. The largest was One Communications for $370 million. It provided fixed-line traditional and digital phone service to more than 100,000 businesses. Then came Saturn Telecommunications Services (STS Telecom) for $28 million. STS Telecom provided voice, data, and Internet services to small and mid-sized business clients in Florida and Georgia. It also bought two managed IT services providers, Business Vitals and xDefenders. Finally, its acquisition of the cloud-based application services business of Synergy Global Solutions expanded its IT support services business and added a hosted applications service for the environmental services market.

In 2010 it bought business communications and technology services provider ITC^DeltaCom for $524 million. Three years later, in 2013, it sold the business to an unknown buyer for an undisclosed amount.

Strategy

EarthLink’s growth plan involves becoming an IT services player for small and mid-sized businesses with IT and network security needs, not just an Internet provider. The company is investing capital to extend its core fiber IP network, adding data centers, and decreasing investments in legacy products.